Categories: Economy

Foxtons benefits from skyrocketing demand for rental properties in London

Foxtons stock rose sharply on Thursday after the brokerage firm strengthened its full-year outlook after a stellar third quarter.

The London-focused group said sales rose 25 percent over the period to £43.8 million. Sales for the nine months to the end of September were 11 per cent higher than the previous year, to £108.9 million.

Sales revenues were up 44 per cent to £11.9 million, while rental revenues were up 18 per cent to £29.2 million and financial services revenues were 37 per cent higher at £2.8 million.

On the rise: Foxtons saw its share price rise sharply today as the group lifted its full-year outlook

Foxton’s Shares rose more than 15 percent earlier in the day and rose 11.61 percent or 3.35p to 32.20p in late morning trading, after falling more than 30 percent in the past year.

In rental, growth was driven by a 23 percent increase in average revenue per transaction, as higher average rents and longer leases offset a 9 percent decline in rental volumes.

Foxtons said rental growth was supported by strong domestic tenant demand, international tenant growth and corporate relocations during the summer months, while rental inventory remains limited.

A sharp rebound in demand for rental housing in London this year has led to a shortage of supply and rapidly rising rental costs for struggling tenants.

The group’s rental income also rose after it conquered two smaller rivals, Gordon & Co and Stones Residential, earlier this year.

In the sales division, there was a 39 percent increase in volumes and a 2 percent increase in average revenue per transaction.

Foxtons said the higher volumes were the result of a more normalized market in the third quarter compared to the previous year, which was impacted by the pull-forward effect of the June 30 stamp duty holiday deadline.

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Guy Gittins, chief executive of Foxtons, said: ‘We are entering the fourth quarter with a less certain market environment, but cost measures taken in H1 and our resilient rental and financial services business enable us to face further macroeconomic and political challenges. to cope.’

Victoria Scholar, head of investment at Interactive Investor, said: “Foxtons is grappling with the recent rise in mortgage rates driven by the Bank of England’s rate hike path and accelerated by the Chancellor’s fiasco.

“Increased mortgage costs have a strong negative impact on demand for homes and condos, which is likely to weigh on the real estate sales force this quarter, especially as we head into the seasonal slowdown in activity around Christmas.

‘It is also much more difficult for first-time buyers to get on the housing ladder, with many potential buyers waiting for the mortgage market to normalize again.

Concerns about a recession in the UK and political uncertainty in Westminster could also deter foreign buyers from looking at properties in London and elsewhere, which could also weigh on the capital’s largest estate agent. In addition, the cost of living crisis is also reducing the budget of potential homeowners when it comes to paying a mortgage.

“This could all play into the hands of Foxtons’ rental business, as customers want to rent rather than buy, given the reduced affordability of mortgages and the pressure on household incomes from inflation. Optimism regarding rental demand is driving Foxtons’ share price sharply this morning.

“But even after today’s gains, shares in Foxtons have struggled lately and are still down about 20 percent year-to-date.”

According to data published by the Office for National Statistics published in July, in the year to June, rents for the UK, excluding London, rose 3.6 percent, compared with a 3.4 percent increase in May.

Private rents in London rose 1.7 percent in the 12 months to June, compared to an increase of 1.5 percent in May, the highest annual rate since February 2017. Despite this, the ONS added, rent growth in London continued. London in June the lowest of all English regions.

Earlier this month, the ONS said average UK house prices rose 13.6 percent in the year to August, up from 16 percent in the year to July.

The average UK house price in August was £296,000, which is £36,000 higher than around this time last year. Despite the lowest annual house price growth, average house prices in London remained the most expensive of any region in the UK, with a record average price of £553,000 in August.

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